Wednesday, October 05, 2016

A rare moment when Congress actually does the will of the people

It doesn't happen often, but it happened a few days ago. Congress, with great reluctance, acted on the will of the people for the people. It was a small minority of people they had in mind, but curiously, the people Congress did act for were a small group of people who do not have very much money. They are the survivors of the victims who died in the 9/11 attacks. What happened?

Both houses of Congress overrode President Obama's veto of a bill that would allow victims of 9/11 to sue the government of Saudi Arabia for their role in the attacks. It is astonishing not just that Congress overrode the veto, but that they did so by resounding majorities. From the New York Times:

Democrats in large numbers joined with Republicans to deliver a remarkable rebuke to the president. The 97-to-1 vote in the Senate and the 348-to-77 vote in the House displayed the enduring power of the Sept. 11 families in Washington and the diminishing influence here of the Saudi government.

Before the 9/11 attacks, the families of the people who died in the attacks were just ordinary people like you and me. But the 9/11 attacks conferred a special power and status upon them, one that has survived for 15 years and prevailed in an election year, no less.

The 9/11 attacks were once used as a rallying point to prop up support for an unpopular president who was often seen as an illegitimate winner in a contentious election. The press regularly mocked him before the attacks and after the attacks, the press shut up and followed the official narrative. Could the same kind of thing be allowed to happen again if Clinton were to win the election?

What is important here is that Congress has actually done something that the people want. It is rare to see such an event considering that it is easily proved that the United States is an oligarchy. The political pressure to pass this bill was so intense that nearly 30 members of Congress signed a letter to note their apprehensions about the bill.

There is something else that is important here. A small minority of people brought to bear on the entire Congress their will, without any money. They prevailed against one of the most powerful interests in this country, a foreign country that is the largest source of oil that we use to power our cars and trucks. They were not billionaires or millionaires. They were people who lost loved ones in the attacks. They were people who had to endure the loss of their businesses when the towers collapsed. They were people who had to breathe the air so fouled by the dust from the collapse of the buildings.

The Saudis have mounted strident legal defenses to prove that they were not involved in the attacks. But the people who would like to sue, and those already in the courts, will finally have their say. I must admit that discovery is going to get very interesting in these lawsuits. The Saudis may have to sing like canaries to prove their innocence.

A vocal minority can still have a lot of power in a democracy. The passing of this bill might finally show a way of wresting the power from the oligarchs and restoring that power to the people. There is a way to influence Congress without money for something that the people really want. Bernie Sanders called that, "getting involved in politics". The families of the 9/11 victims are very organized and they are very involved in politics for their cause.

Happily, someone has noticed that if citizens prevailed in a lawsuit against the government of Saudi Arabia, the Saudis would have to sell an enormous amount of US securities because their assets would be frozen as security for any judgement against them. Estimates suggest that the Saudis would have to sell about $750 Billion in securities, potentially crashing the dollar and making it much weaker than it is now.

This is only a concern if you like American trade deficits. Economist Dean Baker has studiously documented how economic policy has been used to create a trade deficit, sucking $500-600 billion from our economy every year. This is demand that could be used to create jobs here, but the loss of that demand is creating jobs everywhere else. The oligarchs are not willing to spend that kind of money to create the demand necessary to overcome the trade deficit because they profit from that trade deficit.

The oligarchs are not willing to allow the government to spend the money needed to close the gap in demand created by trade deficit, either. But when Congress overrode the veto, they unwittingly created a condition that could upend the cart for the very wealthy. If Congress knows what they are doing, they have found a way to close the trade deficit under cover of helping the victims of 9/11. If not, well, good for them.

Here is how it would work. Let's say that the plaintiffs in the biggest lawsuit prevail against the Saudi government. They win a settlement in the hundreds of billions and the court orders a freeze on Saudi assets. The Saudis would be ahead of this game and they would sell their assets in the US before any lawsuit could get to that point. After the sale of Saudi assets, the dollar takes a hit of 20% for a decade or more. That will raise the price of oil and every other import that the United States buys. You can bet that China is watching this very, very closely. They own more than a trillion in US debt to prop up our dollar, too.

From there, consumers will buy fewer imports. Multinational businesses will lose their edge with foreign manufacturing and bring their operations home to reduce their costs. They may even find it necessary to repatriate $2 trillion stashed offshore. If the Saudis actually sold all of their US assets, that would create demand economic better than anything else we could hope for from Congress.

If the trade deficit were wiped out, 5-6 million jobs would be created in our economy. There would be real pressure on wages to rise due to demand for workers. And no, there wouldn't be enough time to put robots on the line, that takes years to do. The change would be immediate and the MBAs who looked so smart moving our manufacturing base offshore would be looking for work somewhere else. Preferably in another country.

I know, this seems idealistic. But it's important to remember that the trade deficit is the biggest hole in the economy right now. It's something that very few in political discourse are talking about. As we have seen in the last few decades, tax cuts will not fill this hole in demand. No one in power is willing to create a jobs program big enough to fill the hole in demand. People in power are willing to let our infrastructure crumble in order to maintain things as they are. When we see Obama and his pals wringing their hands over that embarrassing vote to override his veto, they are not thinking of us. They are thinking of what will happen if the Saudis sell their assets.

Bernie Sanders was right. Positive change comes from the bottom up, and it's good to remember that it may not always come in the way that we want it when we want it. When Congress overrode Obama's veto for the families of the victims of 9/11, they could not anticipate all of the contingencies created by their act. Let's hope that the Saudis do have to sell their assets so that we can see some real pressure on the dollar, and eventually, close the trade deficit.

This change, this vote against Obama, came from the bottom up. That's often the only way change is going to happen.